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Name
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Title
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Dr. David R. Guyer(1)
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Chief Executive Officer and Chairman of our Board of Directors
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Glenn P. Sblendorio(2)
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President and Board Nominee; Former Chief Operating Officer, Chief Financial Officer and Treasurer
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Barbara A. Wood
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Senior Vice President, General Counsel and Secretary
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Dr. Samir C. Patel(3)
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Former President and Vice Chairman of our Board of Directors
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Henric B. Bjarke(4)
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Former Senior Vice President, Chief Commercial Officer
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Michael G. Atieh(5)
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Former Executive Vice President, Chief Financial and Business Officer
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(1)
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On
April 24, 2017, we announced that Dr. Guyer will transition from Chief Executive Officer to the role of Executive Chairman effective as of
July 1, 2017.
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(2)
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Mr. Sblendorio
assumed the position of Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer effective as of
April 1, 2016. He subsequently ceased to serve as Chief Operating Officer effective as of January 29, 2017 upon the appointment of Keith Westby to such position, and was appointed as
President effective as of January 30, 2017. He ceased serving as Chief Financial Officer and Treasurer effective as of April 24, 2017 upon the appointment of Mr. Carroll to such
positions. On April 24, 2017, we announced that Mr. Sblendorio will also assume the position of Chief Executive Officer effective as of July 1, 2017, in addition to his role as
President, upon the transition of Dr. Guyer to Executive Chairman at such time.
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(3)
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Dr. Patel
resigned as President and from our board effective as of January 13, 2017.
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(4)
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Mr. Bjarke
ceased employment effective as of March 17, 2017.
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(5)
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Mr. Atieh
retired effective as of March 31, 2016.
Executive Summary
Business
We
are a biopharmaceutical company specializing in the development of novel therapeutics to treat ophthalmic diseases, with a focus on diseases of the back of the eye.
To
date, our primary focus has been on developing therapeutics for age-related macular degeneration, or AMD, which is a disorder of the central portion of the retina, known as the
macula, that may result in blindness. Following our announcement in December 2016 that our two pivotal Phase 3 clinical trials for Fovista, an anti-platelet derived growth factor, or PDGF,
aptamer, in
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combination
with Lucentis® for the treatment of wet AMD, failed to meet their primary endpoint, we initiated a plan to review our strategic alternatives in order to maximize stockholder
value and implement an updated business plan.
Leadership Transition
On April 24, 2017, we announced that David R. Guyer, M.D. will transition from Chief Executive Officer to the role of Executive Chairman
effective as of July 1, 2017, and that Glenn P. Sblendorio will assume the position of Chief Executive Officer at such time in addition to his role as President. Mr. Sblendorio was
appointed as President effective as of January 30, 2017. Mr. Sblendorio previously served as Executive Vice President and Chief Operating Officer from April 1, 2016 to
January 29, 2017, and as Chief Financial Officer and Treasurer from April 1, 2016 to April 24, 2017. Mr. Sblendorio is also nominated for election as a class I
director at this year's Annual Meeting. Mr. Sblendorio previously served as a member of our board of directors from July 2013 through March 2016 prior to his joining us as an employee.
Dr. Guyer has served as Chairman of our board of directors since our inception in January 2007 and as our Chief Executive Officer since April 2013.
Effective
as of April 24, 2017, David F. Carroll was promoted to Senior Vice President, Chief Financial Officer and Treasurer. Mr. Carroll joined Ophthotech in June 2016
and previously served as Senior Vice President of Finance. In addition, Keith Westby was promoted to Senior Vice President and Chief Operating Officer effective as of January 30, 2017.
Mr. Westby joined Ophthotech in 2007 and previously served in a variety of operational roles, including most recently as Senior Vice President of Development Operations.
On
January 12, 2017, we entered into a Separation and Release of Claims Agreement with Samir C. Patel, M.D., pursuant to which Dr. Patel resigned from his employment
with the company, as an officer of the company and as a member of the company's board of directors, effective as of January 13, 2017. Dr. Patel previously served as the company's
President and Vice Chairman of the board of directors. Dr. Patel continues to provide consulting and advisory services to us. As a consultant, we continue to have access to Dr. Patel for
continuity in the areas of biopharmaceutical research and development, business development, clinical development, clinical trial site selection, strategy, research, regulatory matters, recruitment,
data analysis and medical affairs.
On
January 11, 2017, as part of a previously announced planned reduction in personnel, the board of directors determined that Henric B. Bjarke, our Senior Vice President and Chief
Commercial Officer, would cease employment with the company effective as of March 17, 2017.
On
January 4, 2016, Michael Atieh announced his retirement as our Executive Vice President, Chief Financial and Business Officer. Mr. Atieh's retirement became effective as
of March 31, 2016.
Components of Our 2016 Executive Compensation Program
The primary elements of our executive compensation program are set forth below. These elements are designed to achieve the objectives of the
program as described further below, with the components
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reflecting
that the majority of the 2016 compensation of each NEO is variable and subject to the achievement of performance goals or stock price appreciation.
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Element
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Description
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Strategic Role
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Base Salary
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Fixed cash compensation.
Targeted generally within the range of the market median for 2016 based on each NEO's individual performance, skills, experience and internal
equity.
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Base salaries provide stable compensation to executive officers, allow Ophthotech to attract and retain capable executive talent and maintain a stable management team.
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Short-Term Incentives: Annual Performance-based Cash Incentive Compensation
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Annual cash incentives are awarded based on the achievement of corporate goals.
Qualitative performance objectives are annually pre-determined and based on achievement of
specific milestones.
Award amounts subject to overall limits.
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Annual cash incentive amounts are designed to motivate executive officers to achieve key milestones.
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Long-term Incentives: Stock Options
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Subject to time- or performance-based vesting conditions, stock options provide a right to purchase shares of Ophthotech's common stock at a specified price which is fixed at the time of grant during a specified
period.
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Recipients only realize value from stock options if the value of Ophthotech's common stock increases above its value on the date the option was granted and the recipient continues to provide services to the company through the vesting period. The
value is solely tied to an increase in the company's stock price, aligning the interests of recipients with those of stockholders.
In addition, for so long as the
outstanding option is vested but unexercised, the recipient may realize value if the value of the company's common stock continues to increase over the remainder of the term of the option. Stock options, therefore, promote the long view and motivate
and reward the recipient for company performance not only over the vesting period, but over the whole term of the option.
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Long-term Incentives: RSUs
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Subject to time- or performance-based vesting conditions, restricted stock units (RSUs) are contractual rights to receive a specified number of shares of Ophthotech's common stock at a future date.
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Attract and retain capable executive talent and encourage long-term decision making.
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Compensation Decisions Relating to 2016
The following provides a high level overview of the decisions with respect to 2016 compensation for our NEOs. Additional information, including
specific compensation amounts, is provided in more detail below under "Components of our Compensation Program" in this CD&A section.
Base Salaries
In January 2016, our board of directors, following approval and recommendation from the compensation committee, approved increases in the annual
base salaries of Dr. Guyer, Dr. Patel, Ms. Wood and Mr. Bjarke in order to provide each of these NEOs with base salaries that were competitive with the companies in our
peer group. Mr. Atieh did not receive an increase in base salary because of his announced retirement effective as of March 31, 2016. The base salary for Mr. Sblendorio was set in
connection with his appointment as Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer effective as of April 1, 2016. We further increased the base salary
for Dr. Patel in June 2016 in recognition of Dr. Patel's critical role with the company and his expected contribution to the achievement of corporate objectives.
Annual Cash Incentive
Each executive officer is eligible to receive annual performance-based cash incentive compensation in an amount based on a percentage of his or
her base salary. We increased the target annual cash incentive compensation opportunity for Dr. Guyer in January 2016 and for Dr. Patel in June 2016. The actual annual cash incentive
amounts payable to our executive officers are based on achievement of stated annual corporate objectives. In February 2016, our board of directors approved our 2016 corporate objectives for our annual
performance-based short-term cash incentive
compensation program. These objectives generally related to the achievement of (1) clinical, regulatory and manufacturing milestones and pre-commercial activities with respect to Fovista,
(2) pre-clinical and clinical milestones with respect to our product candidate Zimura® (avacincaptad pegol) and tivozanib and (3) company infrastructure, compliance and
business development objectives. In December 2016, our board of directors, following approval and recommendation from the compensation committee, determined amounts payable to our NEOs for 2016 for
performance-based cash incentives after taking into account our achievement of corporate goals and considering the results of our completed Phase 3 clinical trials of Fovista.
Annual Equity Awards
In January 2016, as part of our annual grant process, our board of directors, following approval and recommendation from the compensation
committee, approved the grant of options to purchase shares of our common stock and restricted stock units, or RSUs, to our NEOs. Each of the option awards vest with respect to 25% of the shares
subject to the option on the first anniversary of the grant date and with respect to the remaining shares in approximately equal monthly installments through the fourth anniversary of the grant date.
Each of the option awards has an exercise price equal to the last reported sale price of our common stock on The NASDAQ Global Select Market on the date of grant. The RSU awards vest with respect to
25% of the award on each of the first, second, third and fourth anniversaries of the grant date.
In June 2016, the compensation committee approved grants of RSUs with performance-based vesting criteria related to regulatory milestones for
Fovista to Ophthotech employees, including our NEOs serving at that time. These performance-based awards were designed to provide additional retention incentives to our employees to ensure continuity
and the caliber of talent we anticipated
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requiring
to achieve our business and regulatory goals if we obtained favorable results from our Phase 3 clinical trials of Fovista. However, in light of our clinical trial setbacks in December
2016, the
performance-based vesting criteria have a low likelihood of being achieved and our NEOs are unlikely to recognize any value from the grant.
Key Compensation Decisions and Actions After 2016
State of the Business
Following our announcement in December 2016 that our two pivotal Phase 3 clinical trials of Fovista in combination with Lucentis for the
treatment of wet AMD failed to meet their primary endpoint, we initiated a plan to review our strategic alternatives in order to maximize stockholder value, and to implement an updated business plan.
Without limiting any option available to us, the principal focus of this plan, based on our deep expertise and experience in ophthalmology, is to actively explore obtaining rights to additional
products, product candidates and technologies to treat ophthalmic diseases, particularly those of the back of the eye. We are also currently continuing to develop our product candidate Zimura, for the
treatment of geographic atrophy, or GA, a form of dry AMD, and in combination with other drugs for the treatment of wet AMD, and are continuing our remaining Phase 3 Fovista clinical trial,
OPH1004. We plan to reassess our existing Fovista and Zimura development programs throughout 2017 as the implementation of our updated business plan progresses and evolves, with the goal of aligning
corporate resources in the context of a potentially broader product pipeline.
As
part of our strategic review, we may also consider other alternatives, including the acquisition of products, product candidates or technologies or other assets outside of
ophthalmology, mergers or other transactions involving our company as a whole, collaboration transactions, or the license, sale or divestiture of some of our assets or technologies.
Following
the public announcement that our two completed pivotal Phase 3 clinical trials of Fovista failed to meet their primary endpoint, our stock price fell by 86%, from a
closing price of $38.77 on December 9, 2016 to a closing price $5.29 on December 12, 2016. The equity market capitalization of the company decreased from $1.385 billion to
$189 million during that timeframe.
Leadership Transition
As described above, as part of implementing the updated business plan, the company made changes in its senior leadership and conducted a
reduction in personnel. In April 2017, we announced that David R. Guyer, M.D. will transition from Chief Executive Officer to the role of Executive Chairman effective as of July 1, 2017, and
that Glenn P. Sblendorio will assume the position of Chief Executive Officer at such time in addition to his role as President. In January 2017, our board of directors appointed Mr. Sblendorio
as President. Mr. Sblendorio is also nominated for election as a class I director at this year's Annual Meeting. The board also promoted David F. Carroll to Senior Vice President, Chief
Financial Officer and Treasurer and Keith Westby to Senior Vice President and Chief Operating Officer. Samir C. Patel, M.D. resigned from his positions as President and Vice Chairman of the board of
directors. The board also determined that Henric B. Bjarke, our Chief Commercial Officer, would cease employment with the company in March 2017 as part of the reduction in force.
Compensation Committee Rigorous Re-Evaluation of Executive Compensation Program; 2017 Decisions
In the wake of the clinical trial setbacks and in light of the current state of the company's business, the compensation committee sought to
rigorously re-evaluate the company's executive compensation program prior to making decisions about 2017 compensation. To assist in this evaluation, the compensation committee retained its independent
compensation consultant, Radford, a division of Aon Hewitt, which is a subsidiary of Aon plc, to make recommendations regarding a course of action for 2017. For 2017, the compensation committee
determined to move away from a formal pay philosophy but to still continue to consider market data and other internal factors as described further below.
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Peer Group
Given the substantial decrease in the company's market capitalization, the compensation committee first reassessed the peer group used for
reference in making decisions about executive compensation. The compensation committee sought to identify companies that fit the following parameters: biotechnology or pharmaceutical industry,
Phase 2 or early Phase 3 stage of clinical development with a preference for companies that have experienced recent clinical setbacks, a market capitalization in the range of
$100 million to $400 million, and less than 100 employees. Based on these parameters, the compensation committee retained only two of the companies in its previous peer group, and, after
considering a number of companies with higher market values or in later stages of development, identified 18 additional companies that fit within the defined parameters. The company's market
capitalization placed it very close to the median of the new peer group at the time of consideration. Radford also gathered competitive market data from the Radford Global Life Sciences survey, which
was blended with data from public proxy filings to develop competitive market compensation data.
Base Salaries
In light of the company having entered a rebuilding phase after the clinical trial setbacks, the compensation committee determined to freeze
salaries and to forego merit increases for the NEOs at the beginning of 2017. Mr. Sblendorio's base salary will increase as of July 1, 2017 in connection with his promotion to Chief
Executive Officer. Mr. Westby and Mr. Carroll also received base salary increases in connection with their promotions to executive officer positions.
Annual Performance-Based Short-Term Cash Incentive Compensation
The company's target bonuses were found to align with the market 50th percentile, and, as such, at the beginning of 2017 the compensation
committee similarly froze target bonus opportunities for the NEOs at prior year levels as a percentage of annual base salary. Mr. Sblendorio's target bonus will increase as of July 1,
2017 in connection with his promotion to Chief Executive Officer. Mr. Westby and Mr. Carroll also received increased target bonus opportunities in connection with their promotions to
executive officer positions.
Long-Term Incentives
Given the company's current profile and the current share price, and the planned reduction in force and resulting lower number of participants
in the company's 2013 stock incentive plan, the compensation committee determined to transition to using 100% stock options for the long-term equity portion of its compensation program. Subject to
their providing services during the applicable vesting period, recipients only realize value from stock options if the value of our common stock increases over the value of our common stock on the
date the option is granted. Because the value of the award to the recipient is solely tied to an increase in the value of our common stock, the interests of recipients are aligned with those of
stockholders. Also, options promote the long view and motivate and reward the recipient for company performance not only over the vesting period, but also over the whole term of the option. A
long-term incentive approach using only stock options is consistent with 60% of peer companies, and 70% of peer companies use an approach in which at least 70% of total long-term incentive value is
delivered in stock options. The stock options granted in January 2017 reflect our belief that stock options represent an excellent vehicle to give our executive officers an incentive to execute our
plans and to strive to create stockholder value. In determining individual grant amounts for the Chief Executive Officer and the other NEOs, the compensation
committee took into account several factors, including the effects of stock price volatility, striving to maintain a reasonable annual burn rate, delivering competitive equity levels and
considerations specific to each individual.
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Retention Bonuses
In addition, the compensation committee determined that it was in the best interests of the company during a period of significant change to
provide a meaningful ongoing incentive for our continuing NEOs to remain with the company in the form of retention bonuses. The compensation committee and the board of directors, in approving the
retention plan, focused on the importance of and need to retain the services of our experienced management team in pursuing the company's corporate objectives and strategy. The compensation committee
determined that the awards to the continuing NEOs would be payable 50% in cash and 50% in RSUs.
2016 Chief Executive Officer and NEO Pay Mix
The figure below depicts the compensation committee's allocation of 2016 target total direct compensation for our Chief Executive Officer among
base salary, the target cash amount for annual performance-based cash incentive compensation, and the target long-term equity in the form of options and RSUs under the company's equity incentive plan.
The
following figures provide an additional depiction of the compensation committee's allocation of 2016 target total direct compensation for our Chief Executive Officer and for our
other NEOs among base salary and variable pay, consisting of short-term incentive compensation, or STI, based on the target cash amount for annual performance-based cash incentive compensation, and
long-term incentive compensation, or LTI, based on the target long-term equity in the form of options and RSUs under the company's equity incentive plan. A sizeable majority of total direct
compensation is variable, at risk pay, consistent with our pay-for-performance philosophy. Specifically, in 2016, 87% of the target total direct compensation of our Chief Executive Officer was at
risk, and 75% of target total direct compensation of our other NEOs, on average, was at risk. We consider pay to be "at risk" if it is
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subject
to performance-based payment or vesting conditions, or has a value dependent upon our share price.
We
have used general guidelines for allocating between short-term and long-term compensation for our executives.
-
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In general, we have targeted between the 50th percentile and 60th percentile of companies in our peer group for short-term
incentive compensation, which is generally paid in cash, and between the 50th percentile and 75th percentile of companies in our peer group for long-term incentive compensation, which is
generally granted as equity awards.
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Generally, compensation meaningfully above the 50th percentile of companies in our peer group for long-term equity incentive
compensation is granted only for results that exceed performance expectations.
-
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We generally strive to provide our executive officers with a balance of short-term and long-term incentives to encourage consistently strong
performance.
Ultimately,
the objective in allocating between short-term compensation (including base salary and short-term incentive compensation), which is paid currently, and long-term incentive
compensation is to ensure adequate currently-paid base compensation to attract and retain personnel, rewarding for near term business expectations, and providing incentives to maximize long-term value
for Ophthotech and our stockholders. Therefore, we provide cash compensation in the form of base salary, including merit increases where warranted, to meet competitive salary norms and reward good
individual performance on an annual basis, and in the form of short-term incentive compensation to incentivize and reward superior performance as measured against specified annual corporate
objectives. To further focus our executives on longer-term performance and the creation of stockholder value, we rely upon equity-based awards that typically vest over a four-year period. In addition,
we provide our executives
with benefits that are generally available to our salaried employees and severance benefits to incentivize them to continue to strive to achieve stockholder value in connection with change in control
situations. See "Potential Payments Upon Termination or Change in Control" for a discussion of those benefits.
Realizable Pay Demonstrates Alignment
The chart below shows our Chief Executive Officer's "realizable" compensation as compared to his target total direct compensation as reported in
the Summary Compensation Table, or SCT, which immediately follows this CD&A section, averaged over the three year period ending in 2016, and also compared to our stock price. One of the key reasons
that we have included this realizable compensation chart is that it illustrates the amount of compensation that the Chief Executive Officer has actually received or expects to actually receive, in
contrast to the target total direct compensation, which reflects the methodology used in the SCT. We believe the chart provides useful supplemental information to assist our stockholders in
understanding our executive compensation program.
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SCT
compensation consists of (i) actual base salary; (ii) actual annual cash incentive received; and (iii) the value of all long-term incentive awards on the date of
grant, calculated as required for the SCT, and averaged over the prior three years.
Realizable
pay consists of (i) actual base salary; (ii) actual annual cash incentive received; (iii) the value of long-term incentive awards on the vesting date (if
vested) or on December 30, 2016 (if unvested) and February 27, 2017 (if unvested).
The
realizable amount of our long-term incentives for the Chief Executive Officer is significantly below the target opportunity, due to a combination of both performance and stock price
factors. The RSUs granted in 2016 with performance-based vesting criteria related to regulatory milestones for Fovista have a low likelihood of vesting and the Chief Executive Officer is unlikely to
recognize any value from the grant. Similarly, options granted with exercise prices set at the fair market value prior to December 2016 are under water and do not have any value. As such, we believe
this chart demonstrates the strong alignment between our compensation program, amounts that are realizable by the Chief Executive Officer and the interests of our stockholders.
CEO Compensation
SCTvs. Realizable Pay
3 Year
Corporate Governance Practices
We periodically assess, as part of our efforts to ensure that our compensation policies and practices are functioning to align our executive
officers' interests with those of Ophthotech and our stockholders, the effectiveness of the performance of our compensation plans, policies and practices,
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and
review risk mitigation and governance matters. In conjunction with this assessment and review, we have adopted the following best practices.
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What We Do
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What We Don't Do
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ü
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Align pay and performance
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×
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No immediate vesting ("single-trigger") of stock options or RSUs except for certain change-in-control transactions with termination and retirement situations
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ü
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Benchmark against peers whose profile, operations, and business markets share similarities with Ophthotech
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×
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No guaranteed annual bonuses
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ü
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Use equity for long-term incentive awards
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×
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No repricing or backdating of stock options
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ü
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Maintain an appropriate balance between short-term and long-term compensation which discourages short-term risk taking at the expense of long-term results
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×
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No excessive perquisites
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ü
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Implement overall limits to award amounts and vesting levels under annual cash incentives
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×
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No discounted stock options
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ü
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Engage an independent compensation consultant, who performs no other consulting work for Ophthotech
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×
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No highly leveraged incentive plans that encourage excessive risk taking
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ü
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Conduct annual risk assessments of our compensation policies and practices
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2016 Say on Pay Results
We pay careful attention to any feedback we receive from our stockholders about our executive compensation program. At our 2016 annual meeting,
our say-on-pay proposal received
support from 95% of the votes cast by our stockholders on the matter. Our compensation committee believes that the stockholders, through this advisory vote, generally endorsed our compensation
philosophy and principles. Thus, our compensation committee maintained the basic structure and design of our executive compensation program for fiscal year 2016. Nevertheless, the company is committed
to regular, ongoing engagement with stockholders to ensure that we continue to understand stockholder feedback about our compensation programs and other key matters of interest to them, and to enable
us to take that feedback into consideration for our compensation decisions.
Compensation Philosophy and Objectives
Objectives and Philosophy of Our Executive Compensation Program
The primary objectives of the compensation committee with respect to executive compensation are to:
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attract, retain and motivate experienced and talented executives;
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ensure executive compensation is aligned with our corporate strategies, development programs and business objectives;
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foster a shared commitment among executives by aligning their performance with our corporate objectives;
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promote the achievement of key strategic, development and operational performance measures by linking compensation to the achievement of
measurable corporate objectives;
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-
-
provide competitive cash compensation and an opportunity for above-market equity compensation based on performance; and
-
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align the interests of our executives with our stockholders by rewarding performance that leads to the creation of stockholder value.
To
achieve these objectives, the compensation committee evaluates our executive compensation program with the goal of setting compensation at levels that are appropriate based on each
executive's level of experience, performance, growth potential and responsibility and that the compensation committee believes are competitive with other companies in our industry that compete with us
for executive talent. In addition, our executive compensation program ties a significant portion of each
executive's overall compensation to the achievement of key corporate objectives, which reinforces a pay-for-performance culture within our company. We have previously provided a portion of our
executive compensation in the form of stock options and RSUs that vest over time, including in 2016. For 2017, we have granted equity compensation in the form of stock options only. We believe that
time-based vesting for these equity awards helps us retain our executives, reflects the extended nature of the product development cycle in our industry and allows our executives to participate in the
longer term success of Ophthotech as reflected in potential appreciation of our stock price, thereby aligning our executives' interests with those of our stockholders. From time to time, to
incentivize the achievement of critical milestones, we may also grant performance-based equity awards to our executives. We believe any such milestones would also be directly tied to the creation of
stockholder value.
Compensation Determination Process
Role of the Compensation Committee and Our Chief Executive Officer
Our compensation committee oversees our policies governing the compensation of our executive officers. Our compensation committee consists of
three members of our board of directors, each of whom have extensive experience in our industry and is an "independent" director under applicable NASDAQ and SEC rules and an "outside director" under
IRS rules. Our compensation committee uses its judgment and experience when determining the amount and appropriate mix of compensation for each of our executive officers. In addition, our Chief
Executive Officer typically provides input and recommendations to the compensation committee on salary adjustments, annual performance-based short-term cash incentive compensation amounts and
appropriate equity incentive compensation levels for executive officers other than himself. Our Chief Executive Officer supports his recommendations by taking into account each executive's performance
in the past year, including the executive's individual contributions towards achieving our corporate objectives. In the wake of the clinical trial setbacks and in light of the current state of the
company's business, for the 2016 performance-based short-term cash incentive compensation and 2017 equity awards, the compensation committee determined payouts and grants after taking into
consideration input provided by the Chief Executive Officer and exercising further negative discretion with respect to award amounts.
Our
Chief Executive Officer also supports his recommendations by considering market data that is provided to us by Radford. Based on these recommendations, the compensation committee
approves and makes recommendations to our full board of directors for approval of the overall compensation packages for each of our executive officers, including its approval and recommendation
regarding our
Chief Executive Officer's compensation package. In doing so, the compensation committee meets with our independent compensation consultant, in executive session, without management present. The board
of directors has full discretion to approve or modify the recommendations of the compensation committee. Our Chief Executive Officer does not have any control over setting the amount or mix of his
compensation and is not present when either the compensation committee or full board discusses his compensation.
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Pursuant
to the authority granted to our compensation committee under its charter, our compensation committee gives approval to the grant of individual equity awards to our executive
officers, typically subject to further board approval. The compensation committee periodically evaluates the need for revisions to our executive compensation program to ensure our program is
competitive with the companies with which we compete for executive talent, and it did so in early 2017, as described above.
Use of Compensation Consultants and Market Benchmarking
In designing our executive compensation program, our compensation committee considers publicly available compensation data for U.S. companies in
the biotechnology/pharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Our compensation committee retains
the services of Radford to provide it with comparative data on executive compensation practices in our industry and to advise it on our executive compensation program generally. Although the
compensation committee considers the advice and recommendations from Radford when reviewing the executive compensation program, the compensation committee ultimately makes its own independent
decisions about these compensation matters. None of the compensation committee members and none of our executive officers or directors have any personal relationship with Radford. In addition to the
compensation consulting services provided by Radford to the compensation committee, we participate in and pay for the Radford Global Life Sciences Survey and we receive from Radford the results from
such survey. With the approval of the compensation committee chair, Radford also provides consulting services to management regarding our non-executive compensation programs to ensure policy alignment
between the executive and non-executive staff given the importance of teamwork across all aspects of the organization to reach our business objectives. The compensation committee has determined that
no conflicts of interest exist between Ophthotech and Radford.
Peer Group Used for 2016 Compensation Decisions
Our compensation committee uses peer groups to gather data to compare with our existing executive compensation practices and to guide future
compensation decisions. Our compensation consultant also makes suggestions for changes to our executive compensation practices based on its industry knowledge, the data it provides to us as well as
compensation trends in our industry. The compensation committee considers peer group and other industry compensation data and the recommendations of our compensation consultant when making decisions
related to executive compensation, ultimately giving consideration to the competitiveness of our compensation program, internal perceptions of equity and individual circumstances.
Our
compensation committee, with input from our compensation consultant, established a peer group reflective of our company's stage of development to make compensation decisions for
2016. This peer group, which included a mix of biopharmaceutical companies and consisted primarily of companies whose lead products were in phase 3 clinical development at the time of
selection, as well as some companies with marketed pharmaceutical products, was used to establish benchmark compensation levels within our industry and informed compensation decisions. This peer group
for 2016 differed somewhat from the peer group used to make compensation decisions for 2015. Based on Radford's
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review,
we added Chimerix, Inc. and Tesaro, Inc. to the 2016 peer group and removed two other companies from the 2015 peer group. Our 2016 peer group consisted of the following
companies:
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ACADIA Pharmaceuticals,
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Ironwood Pharmaceuticals, Inc.
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Ariad Pharmaceuticals, Inc.
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Keryx Biopharmaceuticals, Inc.
|
Celldex Therapeutics, Inc.
|
|
Lexicon Pharmaceuticals, Inc.
|
Chimerix, Inc.
|
|
Ligand Pharmaceuticals Incorporated
|
Clovis Oncology, Inc.
|
|
Merrimack Pharmaceuticals, Inc.
|
Dyax Corp.
|
|
Nektar Therapeutics, Inc.
|
Exelixis, Inc.
|
|
Neurocrine Biosciences, Inc.
|
ImmunoGen, Inc.
|
|
Portola Pharmaceuticals, Inc.
|
Innoviva, Inc.
|
|
Puma Biotechnology, Inc.
|
Intercept Pharmaceuticals, Inc.
|
|
Tesaro, Inc.
|
Our
peer group is subject to change, and we expect that our compensation committee will continue to periodically review and update the list, as appropriate, according to the criteria
listed above, as it did for 2017.
Annual Compensation Review Process
In prior years, we evaluated each executive's performance for the completed year and assigned an individual performance rating. Our Chief
Executive Officer, with respect to each executive other than himself, prepared a subjective, written evaluation based on his assessment of the executive's performance. This process led to an overall
individual performance rating and a recommendation by our Chief Executive Officer to the compensation committee with respect to each executive officer, other than himself, as
to:
-
-
the achievement of stated corporate performance objectives;
-
-
the level of contributions made to the general management and guidance of Ophthotech;
-
-
the need for salary increases;
-
-
the amount of short-term cash incentive compensation to be paid; and
-
-
whether or not equity awards should be made.
These
recommendations were reviewed by the compensation committee and taken into account when making a final determination as to its recommendation to the full board of directors
regarding the overall compensation packages for our executive officers.
In
December 2016, we announced that our two completed pivotal Phase 3 clinical trials for Fovista failed to meet their primary endpoint, and our compensation committee used a
modified approach to its compensation review process for the determination of 2017 base salaries, the determination of 2016 annual performance-based short-term cash incentive compensation payouts, and
the determination of 2017 equity grants.
Risk Considerations in Our Compensation Program
Our compensation committee has reviewed and evaluated the philosophy and standards on which our compensation plans have been developed and
implemented across our company. It is our belief
28
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that
our compensation programs do not encourage inappropriate actions or risk taking by our executive officers. We do not believe that any risks arising from our employee compensation policies and
practices are reasonably likely to have a material adverse effect on our company. In addition, we do not believe that the mix and design of the components of our executive compensation program
encourage management to assume excessive risks.
We
believe that our current business process and planning cycle fosters the following behaviors and controls that mitigate the potential for adverse risk caused by the action of our
executives:
-
-
annual establishment of corporate and individual objectives for our performance-based cash bonus programs for our executive officers that are
consistent with our annual operating and strategic plans, that are designed to achieve the proper risk/reward balance, and that should not require excessive risk taking to achieve;
-
-
the mix between fixed and variable, annual and long-term and cash and equity compensation are designed to encourage strategies and actions that
balance our short-term and long-term best interests; and
-
-
equity awards generally vest over a period of time, which we believe encourages executives to take a long-term view of our business.
Components of Our Compensation Program
Components in General
The primary elements of our executive compensation program are:
-
-
base salary;
-
-
annual performance-based short-term cash incentive compensation; and
-
-
equity incentive awards.
We
also provide broad-based health and welfare benefits and severance and change in control benefits.
Base Salary
We use base salaries to recognize the experience, skills, knowledge and responsibilities of our employees, including our executive officers.
Base salaries for our NEOs typically are established through arm's length negotiation at the time the executive is hired, taking into account the position for which the executive is being considered
and the executive's qualifications, prior experience and prior salary. None of our executive officers is currently party to an employment agreement that provides for automatic or scheduled increases
in base salary. However, on an annual basis, our compensation committee reviews and evaluates, with input from our Chief Executive Officer, the need for adjustment of the base salaries of our
executives based on changes and expected changes in the scope of an executive's responsibilities.
The
compensation committee also considers promotions, the individual contributions made by, and performance of, the executive during the prior year, the executive's performance over a
period of years, overall labor market conditions, the relative ease or difficulty of replacing the executive with a well-qualified person, our overall growth and development as a company, general
salary trends in our industry and among our peer group and where the executive's salary falls in the salary range presented by that data. In making decisions regarding salary increases, we may also
draw upon the experience of members of our board of directors with other companies. We do not provide for any formulaic base salary increases for our NEOs.
29
Table of Contents
For
2016, the compensation committee approved and recommended annual base salaries for each of our then serving NEOs based on their overall individual performance in 2015, their
increased level of experience and to ensure that their salaries remained competitive with those of similarly situated executives in our 2015 peer group. Mr. Sblendorio's annual base salary was
set at the time he was appointed as Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer. The actual salary paid to Mr. Sblendorio for 2016 was pro-rated to
reflect his start date with us. Mr. Atieh did not receive an increase in base salary because of his announced retirement effective as of March 31, 2016. The foregoing discussion of
annual base salaries does not include additional amounts paid as consulting fees to any of our NEOs during 2015 or 2016. Information with respect to consulting fees can be found in the Summary
Compensation Table which immediately follows this CD&A section.
The
2016 annual base salaries of our NEOs are set forth in the following table.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2015 Base
Salary ($)
|
|
2016 Base
Salary ($)
|
|
%
Change
|
|
Dr. David R. Guyer
|
|
|
600,000
|
|
|
625,200
|
|
|
4.2
|
%
|
Glenn P. Sblendorio(1)
|
|
|
NA
|
|
|
495,000
|
|
|
NA
|
|
Barbara A. Wood
|
|
|
390,940
|
|
|
404,620
|
|
|
3.5
|
%
|
Dr. Samir C. Patel(2)
|
|
|
486,450
|
|
|
625,200
|
|
|
22.2
|
%
|
Henric B. Bjarke(3)
|
|
|
375,000
|
|
|
379,380
|
|
|
1.2
|
%
|
Michael G. Atieh(4)
|
|
|
453,940
|
|
|
453,940
|
|
|
0.0
|
%
|
-
(1)
-
Mr. Sblendorio
assumed the position of Executive Vice President, Chief Operating Officer, Chief Financial and Treasurer effective as of April 1, 2016.
-
(2)
-
Dr. Patel's
annual base salary was adjusted at the beginning of 2016 to $540,000 and again in June 2016 to $625,200 in recognition of Dr. Patel's
critical role with the company and his expected contribution to the achievement of corporate objectives.
-
(3)
-
Mr. Bjarke
joined us in 2015, and the adjustment to his base salary for 2016 took his start date into account.
-
(4)
-
Mr. Atieh
retired effective as of March 31, 2016.
Annual Performance-Based Short-Term Cash Incentive Compensation
We designed our annual performance-based cash incentive compensation program to emphasize pay-for-performance and to reward our NEOs for the
achievement of specified annual corporate objectives. Satisfactory levels of individual performance must be achieved to warrant any payout under the program. Each executive officer is eligible to
receive annual performance-based cash incentive compensation in an amount based on a percentage of his or her base salary.
The
actual annual cash incentive amounts payable to our executive officers are based on achievement of stated annual corporate objectives. Our compensation committee also has the
authority to shift corporate objectives to subsequent years and to eliminate them for the current year's short-term cash incentive calculation if it determines that circumstances that were beyond the
control of the executive were the primary cause of a goal being unattainable.
Our
annual corporate objectives have typically focused on the achievement of specific clinical, regulatory, operational and financial milestones, with a focus on the advancement of our
product
candidates in clinical development, the pursuit of various internal initiatives and ensuring the adequate funding of Ophthotech. For 2017, our corporate objectives focus on our review of strategic
alternatives and implementation of an updated business plan. This includes exploring the possibility of obtaining rights to additional products, product candidates and technologies, reassessing our
existing Fovista and Zimura development programs, adhering to our cash budget and promoting effectiveness and efficiency
30
Table of Contents
in
a smaller organization. The corporate objectives are proposed by senior management each year and reviewed and approved by our compensation committee and board of directors in the beginning of the
year, with such modifications as the compensation committee and board deem appropriate. The corporate objectives are designed to require significant effort and operational success on the part of our
executives and Ophthotech, but also to be achievable with hard work and dedication.
Each
of our compensation committee and our board of directors has authority, in its sole discretion, to review and approve management's recommendation on how our company performed
against its corporate objectives, with the full board of directors having ultimate authority. This authority includes the ability to weight the accomplishment of particular objectives at greater than
100% based on exceptional company performance, with an expectation that overall payouts will remain within a reasonable range of our peer group. Our compensation committee and our board of directors
may also exercise discretion to reduce the payout of short-term cash incentive compensation, notwithstanding the achievement of corporate objectives, based on an evaluation of the overall performance
of the company.
The
target levels for annual performance-based short-term cash incentive compensation for each executive officer are set by the compensation committee as a percentage of each executive
officer's base salary. The percentages that were approved by our compensation committee were derived from peer group data that the compensation committee then interpreted to match the level of
qualification and experience of the executive at Ophthotech as well as based on internal comparisons. For 2016, target percentages for annual performance-based short-term cash incentive compensation
for our executives ranged from 40% to 65% of base salary. We increased the target percentage for Dr. Guyer in January 2016 and for Dr. Patel in June 2016. The 2016 target percentages for
annual performance-based short-term cash incentive compensation for our NEOs who remained employed with us at the end of 2016 are set forth in the following table.
|
|
|
|
|
|
|
2016
Target
|
|
Dr. David R. Guyer
|
|
|
65
|
%
|
Glenn P. Sblendorio
|
|
|
55
|
%
|
Barbara A. Wood
|
|
|
40
|
%
|
Dr. Samir C. Patel
|
|
|
65
|
%
|
Henric B. Bjarke
|
|
|
40
|
%
|
2016 Performance-Based Cash Incentive Compensation
The compensation committee did not set any specific individual performance targets for the payment of cash incentive compensation to our NEOs in
2016. Instead, at the end of 2016, the compensation committee reviewed our company performance against our 2016 corporate objectives as well as the overall progress of our company. The 2016 corporate
objectives established by our compensation committee and board of directors consisted of:
-
-
achieving timelines and other goals with respect to our three Phase 3 clinical trials for Fovista, including the enrollment of patients
in preparation for the New Drug Application, or NDA, of Fovista, and the manufacture of sufficient quantities of active pharmaceutical ingredient of Fovista to support the Phase 3 trials;
-
-
preparation for validation manufacturing processes and pre-approval inspection readiness of our manufacturers, and development of second
sources for manufacture;
-
-
initiation of and achievement of other goals with respect to additional clinical trials for Fovista;
-
-
initiation of and achievement of other goals with respect to clinical trials for Zimura;
31
Table of Contents
-
-
execution of financing, investor relations and cultural assessment objectives; and
-
-
initiation of pre-commercial launch activities for Fovista, including review of messaging and launch strategies and tactics.
In
2016, we moved forward our efforts to meet our clinical development and corporate goals. We met, and in some cases exceeded, these objectives. However, in December 2016, we announced
that our two completed pivotal Phase 3 clinical trials for Fovista for the treatment of wet AMD failed to meet their primary endpoint. Based on our achievements throughout the year, the
compensation committee rated our company performance at 100% in relation to our 2016 corporate objectives. However, considering
the setbacks in connection with Fovista, the compensation committee exercised negative discretion and determined that payouts to our NEOs should instead be based on 80% of target amounts. The full
board of directors subsequently approved this conclusion.
The
table below sets forth the payouts to our NEOs who remained employed with us at the end of 2016 under our annual performance-based short-term cash incentive compensation program.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Base
Salary ($)
|
|
Target
Annual
Cash
Incentive
(% of
Base
Salary)
|
|
Target
Award
($)
|
|
Company
Performance
Factor
|
|
Payout
($)
|
|
Incentive
Payout (%
of Base
Salary)
|
|
Dr. David R. Guyer
|
|
|
625,200
|
|
|
65
|
%
|
|
406,380
|
|
|
80
|
%
|
|
325,104
|
|
|
52
|
%
|
Glenn P. Sblendorio(1)
|
|
|
495,000
|
|
|
55
|
%
|
|
272,250
|
|
|
80
|
%
|
|
163,350
|
|
|
33
|
%
|
Barbara A. Wood
|
|
|
404,620
|
|
|
40
|
%
|
|
161,848
|
|
|
80
|
%
|
|
129,478
|
|
|
32
|
%
|
Dr. Samir C. Patel
|
|
|
625,200
|
|
|
65
|
%
|
|
406,380
|
|
|
80
|
%
|
|
325,104
|
|
|
52
|
%
|
Henric B. Bjarke
|
|
|
379,380
|
|
|
40
|
%
|
|
151,752
|
|
|
80
|
%
|
|
121,402
|
|
|
32
|
%
|
-
(1)
-
The
performance-based short-term cash incentive compensation for Mr. Sblendorio was pro-rated based on the start of his employment in April 2016.
Equity Incentive Awards
Our equity award program is the primary vehicle for offering long-term incentives to our executives. We believe that equity awards provide our
executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives
and our stockholders. In addition, we believe that equity awards with a time-based or performance-based vesting feature promote executive retention because this feature incentivizes our executive
officers to remain in our employment during the vesting period.
To
date, we have used equity awards both to compensate our executive officers in the form of new hire grants in connection with the commencement of employment, as well as to provide
additional, ongoing long-term incentives to our executive officers as our business has developed. In the future, we also generally plan to continue to grant equity awards on an annual basis to our
executive officers.
Typically,
the stock options and RSUs we have granted to our executive officers vest over a period of four years. Vesting ceases upon termination of employment, and exercise rights, for
options, cease shortly after termination of employment. Prior to the exercise of a stock option or settlement of an RSU, the holder has no rights as a stockholder with respect to the shares subject to
such option or RSU, including voting rights or the right to receive dividends or dividend equivalents. We have historically granted stock options with exercise prices that are set at no less than the
fair market value of shares of our common stock on the date of grant as determined by reference to the closing market price of our common stock on the date of grant. In 2017, we only granted stock
options, and we did not grant RSUs as part of our regular annual equity award process. See "Compensation
32
Table of Contents
Determination
ProcessKey Compensation Decisions and Action After 2016" above in this CD&A section.
New Hire Equity Awards
We determine whether to grant a new hire equity award in connection with the commencement of an executive's employment on a case-by-case basis
under the specific hiring circumstances. The size of each new hire award is established through arm's length negotiation at the time the executive is hired, taking into account the position for which
the executive is being considered and the executive's qualifications, prior experience and equity holdings at prior companies, as well as external factors such as market demand. Mr. Sblendorio
received a new-hire grant of options to purchase 150,000 shares of common stock and 75,000 RSUs effective April 1, 2016. The option award vests with respect to 25% of the shares subject to the
option on the first anniversary of the grant date and with respect to the remaining shares in approximately equal monthly installments through the fourth anniversary of the grant date. The option
award has an exercise price equal to the last reported sale price of our common stock on The NASDAQ Global Select Market on the date of grant. The
RSUs vest with respect to 25% of the award on each of the first, second, third and fourth anniversaries of the grant date.
Annual Equity Awards
In determining the size of the annual equity awards granted to our NEOs, our compensation committee considers recommendations developed by our
compensation consultant, including information regarding comparative stock ownership of, and equity awards received by, executives at companies in our peer group and our industry. In addition, our
compensation committee considers each executive's individual performance rating, the amount of equity previously awarded to such executive and the future vesting of such awards, as well as our overall
corporate performance and the potential for enhancing the creation of value for our stockholders.
Our
practice through the beginning of 2016 was to grant annual equity awards for a given year effective on the first business day of such year. The grant date fair values of equity
awards granted to our NEOs as of the first business day of 2016 are included in the amounts set forth in the "Summary Compensation Table" which immediately follows this CD&A section.
Annual Equity Awards Granted as of January 4, 2016
In January 2016, as part of our annual grant process, our compensation committee approved the grant of options to purchase shares of our common
stock and RSUs to the NEOs listed in the table below in the amounts set forth in the table. Each of the option awards vest with respect to 25% of the shares subject to the option on the first
anniversary of the grant date and with respect to the remaining shares in approximately equal monthly installments through the fourth anniversary of the grant date. Each of the option awards has an
exercise price of $73.22 per share, the last reported sale price of our common stock on The NASDAQ Global Select Market on January 4, 2016, the date of grant. The RSU
33
Table of Contents
awards
vest with respect to 25% of the award on each of the first, second, third and fourth anniversaries of the grant date.
|
|
|
|
|
|
|
|
Name
|
|
Number of
Shares
Underlying
Stock Option
Grant
|
|
Number of
Shares
Underlying
RSU
Grant
|
|
Dr. David R. Guyer
|
|
|
95,000
|
|
|
25,000
|
|
Barbara A. Wood
|
|
|
19,200
|
|
|
4,800
|
|
Dr. Samir C. Patel(1)
|
|
|
78,700
|
|
|
19,700
|
|
Henric B. Bjarke(2)
|
|
|
11,300
|
|
|
2,800
|
|
-
(1)
-
The
board also approved, effective as of January 4, 2016, additional special equity awards to Dr. Patel of 16,300 stock options and 5,300 RSUs, with
the same vesting terms and exercise price as described above. These special equity awards were in recognition of Dr. Patel's particular efforts relating to timely initiation and enrollment of
clinical trials. The aggregate amount of the annual and special awards to Dr. Patel were 95,000 stock options and 25,000 RSUs.
-
(2)
-
Mr. Bjarke
joined Ophthotech in August 2015. The grants of stock options and RSUs reflect the pro-rated portion of the prior year during which
Mr. Bjarke served as our Senior Vice President, Chief Commercial Officer.
In
making these annual equity awards, our compensation committee considered, among other things, the Black Scholes value of the annual equity awards and the size of the annual equity
awards as a percentage of our company's outstanding stock, dilution to existing stockholders and the retention value in the outstanding equity program based on the value of outstanding unvested
awards, all of which were considered in light of individual and company performance. Based on the recommendation of our Chief Executive Officer, and in consideration of our company's performance
against our 2015 corporate objectives, our compensation committee determined that it would be appropriate to grant equity awards in a range between the 60th percentile and
75th percentile of companies in our peer group in effect at that time. To promote our philosophy of providing the potential for above-market equity compensation based on performance, individual
equity awards were adjusted within the peer group range based on the individual performance rating of each NEO.
The
mix of stock options and RSUs granted in January 2016 reflected our perspective at that time that a mix of compensation components incentivizes consistently strong performance. Our
approach reflected what we believe is a balanced equity mix between options and RSUs, providing executives with exposure to downside stock-price risk, while taking into consideration overall dilution
levels and our limited equity pool available under our stock incentive plan, especially in light of our significant growth in company-wide headcount in 2015, and while still providing for overall
long-term equity incentive compensation within the 60th percentile to 75th percentile range based on 2015 peer group analysis.
Effective June 6, 2016, the compensation committee approved grants of RSUs with performance-based vesting criteria related to regulatory
milestones for Fovista to Ophthotech employees, including our NEOs serving at that time. These performance-based awards were designed to provide additional retention incentives to our employees to
ensure continuity and the caliber of talent we anticipated requiring to achieve our business and regulatory goals if we obtained favorable results from our Phase 3 clinical trials of Fovista.
However, in light of our clinical trial setbacks in December 2016, the performance-based vesting criteria have a low likelihood of being achieved and our NEOs are unlikely
34
Table of Contents
to
recognize any value from the grant. The compensation committee approved the grant of RSUs to the NEOs listed in the table below in the amounts set forth in the table.
|
|
|
|
|
Name
|
|
Number of Shares
Underlying RSU Grant
|
|
Dr. David R. Guyer
|
|
|
25,000
|
|
Dr. Samir C. Patel
|
|
|
25,000
|
|
Glenn P. Sblendorio
|
|
|
8,900
|
|
Barbara Wood
|
|
|
4,800
|
|
Henric B. Bjarke
|
|
|
8,400
|
|
Annual Equity Awards Granted as of January 30, 2017
In January 2017, as part of our annual grant process, our compensation committee approved the grant of options to purchase shares of our common
stock to the NEOs listed in the table below in the amounts set forth in the table. Each of these option awards will vest with respect to 25% of the shares subject to the option on the first
anniversary of the grant date and with respect to the remaining shares in approximately equal monthly installments through the fourth anniversary of the grant date. Each of the option awards has an
exercise price of $4.52 per share, the last reported sale price of our common stock on The NASDAQ Global Select Market on January 30, 2017, the date of grant.
|
|
|
|
|
Name
|
|
Number of Shares
Underlying
Stock Option Grant
|
|
Dr. David R. Guyer
|
|
|
260,000
|
|
Glenn P. Sblendorio
|
|
|
260,000
|
|
Barbara A. Wood
|
|
|
38,000
|
|
In
making these annual equity awards, our compensation committee considered a number of factors, including dilution to existing stockholders and the retention value in the outstanding
equity program based on the value of outstanding unvested awards. In consideration of our company's performance against our 2016 corporate objectives, our compensation committee determined that it
would be appropriate to grant equity awards in an amount corresponding to the 60th percentile of companies in our 2017 peer group. To promote our philosophy of providing the potential for
above-market equity compensation based on performance, individual equity awards were adjusted within the peer group range based on the individual performance rating of each NEO.
Given
the company's current profile and the current share price, and the planned reduction in force and resulting lower number of participants in the company's 2013 stock incentive plan,
the compensation committee determined to transition to using 100% stock options for the long-term equity portion of its compensation program for 2017. The stock options granted in January 2017 reflect
our belief that stock options represent an excellent vehicle to give our executives an incentive to execute our plans and to strive to create stockholder value.
Retention Arrangements
In January 2017 the compensation committee also determined that it was in the best interests of the company during a period of significant
change to provide a meaningful ongoing incentive for our continuing NEOs to remain with the company in the form of retention bonuses. The compensation committee and the board of directors, in
approving the retention plan, focused on the importance of and need to retain the services of our experienced management team in pursuing the company's updated corporate objectives and strategy. The
compensation committee determined that the awards to the continuing NEOs would be payable 50% in cash and 50% in RSUs.
35
Table of Contents
On January 11, 2017, the board of directors approved a retention bonus for the NEOs listed in the table below in the amounts set forth in the table. These
bonuses are in addition to regular annual bonuses.
|
|
|
|
|
|
|
|
Name
|
|
Number of Shares
Underlying RSU
Grant
|
|
Cash Award
($)
|
|
Dr. David R. Guyer
|
|
|
60,960
|
|
|
304,785
|
|
Glenn P. Sblendorio
|
|
|
40,840
|
|
|
204,188
|
|
Barbara A. Wood
|
|
|
24,280
|
|
|
121,386
|
|
The
cash portion of the retention bonuses is payable in two equal installments on or within 30 days following June 30, 2017 and December 29, 2017, subject to such
executive officer's continued employment with the company through each such payment date or otherwise in the event that prior to such payment date either (1) such executive officer is
terminated other than for cause or (2) there is a Change in Control Event (as defined in the company's 2013 Stock Incentive Plan, as amended). The RSU awards have a grant date of
January 17, 2017. Subject to such executive officer's continued employment with the company and the other terms and conditions under the company's 2013 Stock Incentive Plan and such executive
officer's employment agreement, each RSU award will vest with respect to 50% of the shares subject to the award on each of June 30, 2017 and December 29, 2017.
Leadership Transitions
David R. Guyer, M.D.'s Transition to Executive Chairman
On April 24, 2017, we announced that Dr. Guyer will transition from Chief Executive Officer to the role of Executive Chairman
effective as of July 1, 2017. In connection with this transition, on April 24, 2017, we entered into a letter agreement with Dr. Guyer to amend certain
provisions of his existing offer letter agreement dated as of April 26, 2013, and previously amended as of February 26, 2015. The letter agreement provides for at-will employment, with
an initial annual base salary of $625,000 through December 31, 2017, with an adjustment to an annual base salary of $525,000 effective January 1, 2018. In addition, Dr. Guyer will
be eligible for an annual target short-term cash incentive compensation opportunity of up to 65% of base salary for calendar year 2017, and an annual target short-term cash incentive compensation
opportunity of up to 50% of base salary for each calendar year beginning with calendar year 2018. Dr. Guyer will also remain eligible to participate in the employee benefit programs generally
available to employees of the company.
The
letter agreement also amends and restates Dr. Guyer's existing severance arrangements with us. Pursuant to the letter agreement, in the event that Dr. Guyer's
employment is terminated without "cause" (as such term is defined in the letter agreement) or if Dr. Guyer terminates his employment for any reason, Dr. Guyer will be entitled to receive
an amount equal to 12 months of his base salary (at the greater of an annualized base salary rate of $625,000 or his then-current annualized base salary rate); a pro-rated portion of his target
annual short-term cash incentive opportunity for the year in which his employment is terminated (at the greater of a 65% target bonus rate or his then-current target bonus rate); and continued
coverage, at our expense, under the company's medical and dental benefit plans to the extent permitted under such plans for a period of 12 months immediately following the date of the
termination of Dr. Guyer's employment. These severance benefits are subject to the execution and effectiveness of a separation agreement and release of claims in favor of us and our affiliates.
In addition, if Dr. Guyer's employment is terminated without "cause" or for "good reason" within one year following a "change in control event" (as each such term is defined in the letter
agreement), Dr. Guyer is entitled to full acceleration of vesting of any then-unvested equity awards held by him that vest solely based on the passage of time.
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Glenn P. Sblendorio's Assumption of Positions of Chief Executive Officer and President; Previous
Appointment as Chief Operating Officer and Chief Financial Officer
On January 4, 2016, Mr. Sblendorio was appointed Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Treasurer of the company. He commenced employment in such capacity on April 1, 2016. He subsequently ceased to serve as Chief Operating Officer effective as of January 29, 2017 upon the
appointment of Keith Westby to such position, and was appointed as President effective as of January 30, 2017. He ceased serving as Chief Financial Officer and Treasurer effective as of
April 24, 2017 upon the appointment of David Carroll to such positions. On April 24, 2017, we announced that Mr. Sblendorio will also assume the position of Chief Executive
Officer effective as of July 1, 2017, in addition to his role as President, upon the transition of Dr. Guyer to Executive Chairman at such time,
We
entered into an offer letter agreement with Mr. Sblendorio on January 4, 2016 providing for at-will employment, an annual base salary of $495,000, target annual
short-term cash incentive compensation opportunity of up to 55% of base salary, and eligibility to participate in the employee benefit programs of the company generally available to employees of the
company. Pursuant to the offer letter agreement, effective as of April 1, 2016, Mr. Sblendorio also received equity awards as described above under "Equity Incentive
AwardsNew Hire Awards." In addition, Mr. Sblendorio received a sign-on bonus of $100,000.
On
April 24, 2017, we entered into a letter agreement with Mr. Sblendorio to amend certain provisions of his existing offer letter agreement in anticipation of his assuming
the role of Chief Executive Officer. This amendment provides for at-will employment, an annual base salary of $625,000 effective as of the effective date of Mr. Sblendorio's promotion to Chief
Executive Officer, and target annual short-term cash incentive compensation opportunity of up to 65% of base salary. Mr. Sblendorio will also remain eligible to participate in the employee
benefit programs generally available to employees of the company. In addition, Mr. Sblendorio has been granted certain severance benefits as described below under "Executive
CompensationPotential Payments Upon Termination or Change in Control."
Mr. Sblendorio
also has exclusive access to a corporate apartment in New York, New York, near our corporate headquarters, for his personal use. The rental expense for the
apartment is approximately $7,400 per month.
David F. Carroll's Assumption of Position of Chief Financial Officer
Effective as of April 24, 2017, Mr. Carroll was promoted to Senior Vice President, Chief Financial Officer and Treasurer.
Mr. Carroll joined Ophthotech on June 24, 2016 and previously served as Senior Vice President of Finance.
In
connection with his appointment, our board, following approval and recommendation from the compensation committee, approved an increase in Mr. Carroll's annual base salary to
$375,000 and an increase in his annual target short-term cash incentive compensation to 40% of base salary. Mr. Carroll will be granted a nonstatutory stock option to purchase up to 63,500
shares of our common stock at a per share exercise price equal to the closing price of our common stock on the grant date of April 24, 2017. The option award will vest over a four-year period,
with 25% of the shares underlying the option vesting on the first anniversary of the grant date and the remainder of the shares vesting in equal monthly amounts thereafter until the fourth anniversary
of the grant date, subject to continued service with the company. In addition, the board approved certain severance benefits for Mr. Carroll as described below under "Executive
CompensationSeverance and Change in Control Agreement with Mr. Carroll."
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Keith Westby's Assumption of Position of Chief Operating Officer
In addition, Mr. Westby was promoted to Senior Vice President and Chief Operating Officer effective as of January 30, 2017.
Mr. Westby joined Ophthotech in 2007 and previously served in a variety of operational roles, including most recently as Senior Vice President of Development Operations.
In
connection with his appointment, our board, following approval and recommendation from compensation committee, approved an increase in Mr. Westby's annual base salary to
$325,000 and an increase in his annual target short-term cash incentive compensation to 40% of base salary. In addition, the board approved certain severance benefits for Mr. Westby as
described below under "Executive CompensationSeverance and Change in Control Agreement with Mr. Westby."
Resignation of Samir C. Patel, M.D.
On January 12, 2017, we entered into a Separation and Release of Claims Agreement with Dr. Patel, pursuant to which
Dr. Patel resigned from his employment with the company, as an officer of the company and as a member of the company's board of directors, effective as of January 13, 2017.
Dr. Patel previously served as the company's President and Vice Chairman of the board of directors. Dr. Patel continues to provide consulting and advisory services to us under a
Consulting Agreement, effective as of January 13, 2017. Dr. Patel has agreed to provide consulting and advisory services, as directed by the company's Chief Executive Officer, in areas
which may include, without limitation, biopharmaceutical research and development, business development, clinical development, clinical trial site selection, strategy, research, regulatory matters,
recruitment, data analysis and medical affairs.
Under
the Separation Agreement, Dr. Patel is entitled to receive the following severance benefits: (1) payment of his base salary of $52,083 per month for 12 months;
(2) payment of $14,469, representing a pro-rated portion of his target annual bonus for 2017; and (3) ongoing healthcare coverage, or payment of monthly premiums for healthcare coverage,
for up to 12 months. The severance benefits will
be provided to Dr. Patel after the earlier to occur of the end of the consultation period under the Consulting Agreement and his "separation from service" from the company as defined in
applicable Treasury regulations. Under the Consulting Agreement, Dr. Patel receives consulting fees of $41,667 per month plus ongoing healthcare coverage (or reimbursement or payment of
premiums for healthcare coverage), and the equity grants to him that are outstanding remain outstanding and will vest, if at all, in accordance with their terms.
Departure of Henric B. Bjarke
On January 11, 2017, as part of a previously announced planned reduction in personnel, the board of directors determined that
Mr. Bjarke, our Senior Vice President and Chief Commercial Officer, would cease employment with the company effective as of March 17, 2017. Under his employment arrangements with the
company, Mr. Bjarke received the following severance benefits: (1) payment of an amount equal to 12 months of his base salary; (2) a pro-rated portion of his target annual
bonus for 2017; and (3) reimbursement for monthly premiums for healthcare coverage for up to 12 months immediately following termination of his employment.
Retirement of Mr. Michael Atieh
On January 4, 2016, Mr. Atieh announced his retirement as Executive Vice President, Chief Financial and Business Officer and
Treasurer. Mr. Atieh's retirement became effective as of March 31, 2016. In connection with the notification by Mr. Atieh of his decision to retire, we entered into a Separation
Agreement and General Release with Mr. Atieh. Under the Separation Agreement, Mr. Atieh received the following severance and other benefits following the end of his employment:
(1) a lump sum payment in the amount of $453,940, consisting of 12 months of Mr. Atieh's annual base
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salary;
(2) a lump sum payment of $113,484, consisting of Mr. Atieh's pro-rata target short-term cash incentive compensation for 2016; (3) reimbursement for COBRA coverage under
company-subsidized health benefits for a period of 18 months or, if earlier, until the end of the calendar month in which Mr. Atieh becomes eligible to receive health benefits under
another employee benefit plan; (4) a lump sum payment in respect of company-subsidized medical coverage for Mr. Atieh and his spouse through
the date Mr. Atieh becomes eligible for Medicare (less any amounts payable for COBRA coverage for such period); and (5) continued exercisability through September 30, 2019 of
stock options and RSUs that are vested as of the end of the period in which Mr. Atieh provided consulting services to the company as described below.
Pursuant
to the terms of the Separation Agreement, following the end of his employment, Mr. Atieh agreed to provide certain advisory and other consulting services to the company
on an as-needed basis until September 30, 2016. As compensation for such services, (1) for consulting services provided prior to June 30, 2016, Mr. Atieh was compensated a
monthly fee equal to $37,828, and (2) for consulting services provided from July 1, 2016 through September 30, 2016, Mr. Atieh was compensated a monthly fee of $1,000.
Additional Compensation Policies and Practices
Limits on Hedging and Pledging
As part of our insider trading policy, all employees, including executive officers, and members of our board of directors are prohibited from
engaging in certain types of hedging transactions involving our securities, specifically short sales, including short sales "against the box," and purchases or sales of puts, calls or other derivative
securities. Our insider trading policy also prohibits certain types of pledges of our securities by all employees, including executive officers, and members of our board of directors, specifically
purchases of our securities on margin, borrowing against our securities held in a margin account or pledging our securities as collateral for a loan, with an exception for pledges of our securities as
collateral for a loan only after certain prerequisites are met and only with the pre-approval of our Chief Financial Officer or General Counsel.
Clawback Policy
Effective in March 2017, our board of directors adopted a clawback policy to which all equity and non-equity incentive-based compensation
granted after the policy's adoption,
including stock options awarded as compensation, is subject. The policy provides that if both (1) an accounting restatement is required due to our material noncompliance with any financial
reporting requirement under the U.S. federal securities laws and (2) the board of directors (or a duly established committee thereof), in its sole discretion, determines that an act or omission
of a current or former executive officer contributed to the circumstances requiring the restatement and that such act or omission involved fraud or intentional misconduct, then we will use reasonable
efforts to recover from such person up to 100% of any incentive-based compensation from the company during the three-year period preceding the date on which we are required to prepare such accounting
restatement.
Stock Retention and Ownership Guidelines
Effective in March 2017, our board of directors adopted stock retention and ownership guidelines applicable to our executive officers and
directors. Under these guidelines, the covered persons will be required to acquire shares of our common stock or other equity rights equal in value to three times (3x) annual base salary in the case
of our Chief Executive Officer and Executive Chairman, one times (1x) annual base salary in the case of our other executive officers and three times (3x) the annual cash retainer in the case of
non-employee directors. The covered persons serving as of the date of initial adoption of the guidelines are expected to meet these ownership guidelines by January 1, 2023 in the
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case
of our Chief Executive Officer, Executive Chairman and non-employee directors or January 1, 2025 in the case of our other executive officers. Newly hired and newly promoted executive
officers and newly elected directors are expected to meet these ownership guidelines within five years in the case of the Chief Executive Officer, Executive Chairman and non-employee directors or
seven years in the case of other executive officers from the date of hire, promotion or initial election, as applicable. In the event of an increase in an executive officer's annual base salary or a
non-employee director's annual cash retainer, as applicable, he or she will have two years from the time of the increase to acquire any additional shares needed to meet the ownership guidelines.
Vested
stock options and RSUs subject to time based vesting are included (and deemed to be held by the covered person) for purposes of determining satisfaction of the ownership
guidelines based on 70% of their net value as determined in accordance with the guidelines. Unvested stock options and equity awards subject to performance-based vesting are not included for purposes
of determining satisfaction of the ownership guidelines.
If
an executive officer or director does not satisfy the ownership guideline under the review procedures set forth in the guidelines following the conclusion of any applicable phase-in
period, then the covered person is expected to thereafter retain all shares of common stock (vested or unvested) held by the covered person as of that time, and at least 75% of the net after-tax
shares of common stock thereafter acquired, until such time as the covered person satisfies the ownership guideline.
In
addition, until a covered person satisfies the ownership guidelines, there is an expectation that, among other things, each executive officer and director will retain at least 50% of
the net after-tax shares received upon the exercise or vesting of any equity award granted by the company as compensation for a period of at least one year from the vesting date. If a covered person
thereafter satisfies the ownership guidelines, then the retention expectation shall cease to be applicable for the ensuing year and the covered person may dispose of shares in an amount that would
allow such person to remain in compliance with the ownership guidelines.
Tax and Accounting Considerations
Section 162(m) of the Code, as amended, generally disallows a tax deduction for compensation in excess of $1 million paid to each
of our Chief Executive Officer and our three other most highly paid executive officers (other than our Chief Financial Officer). Qualifying performance-based compensation is not subject to the
deduction limitation if specified requirements are met. We intend to periodically review the potential consequences of Section 162(m), and we generally intend to structure the performance-based
portion of our executive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation will remain tax deductible to us. However, the compensation committee
may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain
executive talent and are in the best interests of our stockholders.
We
account for equity compensation paid to our employees in accordance with FASB Accounting Standards Codification Topic 718, CompensationStock Compensation, or
ASC 718, which requires us to measure and recognize compensation expense in our financial statements for all stock-based payments based on an estimate of their fair value over the service
period of the award. We record cash compensation as an expense at the time the obligation is accrued.
Severance and Change in Control Benefits
Pursuant to employment agreements or arrangements we have entered into with our executive officers, our executive officers are entitled to
specified benefits in the event of the termination of their employment under specified circumstances, including termination following a change in control of Ophthotech. Please refer to "Material Terms
of Employment AgreementsEmployment Agreements"
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for
a more detailed discussion of these benefits. We have provided estimates of the value of the severance payments and other benefits that would have been made or provided to executive officers under
various termination circumstances under the caption "Potential Payments Upon Termination or Change in Control" below.
We
believe that providing these benefits helps us compete for executive talent. After reviewing the practices of companies represented in the compensation peer group, we believe that our
severance and change in control benefits are generally in line with severance packages offered to executives of our publicly traded peer companies.
We
have structured our change in control benefits as "double trigger" benefits. In other words, the change in control does not itself trigger benefits. Rather, benefits are paid only if
the employment of the executive officer is terminated during a specified period after the change in control. We believe that a "double trigger" benefit maximizes stockholder value because it prevents
an unintended windfall to executive officers in the event of a friendly change in control, while still providing them appropriate incentives to cooperate in negotiating any change in control in which
they believe they may lose their jobs.
Benefits and Other Compensation
We believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified
personnel. We maintain broad-based
benefits that are provided to all employees, including medical, dental, group life insurance, accidental death, dismemberment insurance, long- and short-term disability insurance, and a 401(k) plan.
All of our executives are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. The compensation committee in its discretion may revise,
amend or add to the NEO's benefits and perquisites if it deems it advisable.
In
particular circumstances, we may agree to reimburse an executive officer for certain expenses, such as commuting or travel expenses, or provide corporate housing as an additional
incentive to join Ophthotech in a position where there is high market demand. Whether such expenses are covered and the amount of the reimbursement is determined on a case-by-case basis under the
specific hiring circumstances.
401(k) Retirement Plan
We maintain a 401(k) retirement plan that is intended to be a tax-qualified defined contribution plan under Section 401(k) of the
Internal Revenue Code of 1986, as amended, or the Code. In general, all of our employees are eligible to participate, beginning on the first day of the month following commencement of their
employment. The 401(k) plan includes a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation by up to the statutorily prescribed limit, equal to
$18,000 in 2016 (or $24,000 for employees over 50 years of age), and have the amount of the reduction contributed to the 401(k) plan. We match 100% of an employee's contributions to the 401(k)
plan up to the first 2% of the employee's salary, and 50% of the employee's contributions up to the next 4% of the employee's salary, up to a maximum amount of $8,000 per employee.
Pension Benefits
We do not maintain any defined benefit pension plans.
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred compensation plans.
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Rule 10b5-1 Sales Plans
Some of our senior employees, including our NEOs, and directors have adopted written plans, known as Rule 10b5-1 plans, in which they
have contracted with a broker to buy or sell shares of our common stock on a periodic basis. These plans were adopted when such employees or directors were not in possession of material, nonpublic
information and in accordance with our insider trading policy. Our directors and other senior employees may also adopt such plans in the future. Under a Rule 10b5-1 plan, a broker executes
trades pursuant to parameters established by the director or employee when entering into the plan, without further direction from the director or employee. It also is possible that the director or
employee could amend or terminate any such plan when not in possession of material, nonpublic information and otherwise in accordance with our insider trading policy. In addition, our directors and
employees, including our NEOs, may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information and otherwise in accordance
with our insider trading policy.